The impact of the credit crunch on online advertising

Our friends at Credit Today asked us to comment for their October edition on the following question:

Globally-speaking, sub-prime lenders have been some of the biggest web advertisers until the credit crunch. How is this lost revenue likely to impact the UK technology/media sectors?

It was a pretty interesting question, and it caused a fair bit of discussion here in the office. None of us really had any idea what the right answer was, until we sat down to work it out and try to write up an answer. The constraint of only have 200 words to work with was actually very powerful in making us come down on one side of the fence or the other. With more space to work with, we could have prevaricated a little more and essentially expressed both sides!

It was also interesting, because we were asked our opinion before Search Engine Land pointed to people who know far more about these things than we do, and yet we seemed to broadly agree!

In the end, the short answer we came up with was:

A large proportion of internet advertising is pay-per-click (PPC) advertising where companies pay for their advert to appear alongside search results.

A reduction in the spend of the sub-prime lenders in this market would reduce competition for some key phrases. The highest-volume phrases, however, do not identify the quality of the lead (as many people will search ‘mortgage company’ even if the search should be classified as sub-prime).

The competition on these phrases will remain fierce. While the cost-per-click may reduce slightly, it should be negligible and we don’t anticipate a significant downturn in the search engines’ revenues as a result.

When looking at advertising on individual websites, the only people likely to suffer are websites dedicated to sub-prime lending or possibly those in the wider financial sector. We do not anticipate an effect on the UK technology sector.

The level of competition in the financial sector leads us to believe that even post-crunch, advertisers will continue to compete hard for the available online inventory. While some individual advertisers may leave the market, we would predict that the growth in online advertising in general will outstrip this effect. We may therefore see a slowing in growth, but not an overall decline in advertising revenues unless the credit crunch spreads into a more general downturn.

You can read the full article including other people’s opinions in this pdf: Distilled Credit Today Article.

As well as allowing us to give our opinion, this article was also interesting to us because it quoted a friend of Tom’s, Cheryl Clark of MoneyQuest, who said:

When news broke of the sub-prime mortgage crisis in the US lending market, we were sure we would feel the effects and the UK financial industry certainly did. As an experienced online marketeer specialising in this market, I am surprised, but delighted to say that so far, I have not seen the same upheaval in our online lead volume, quality or spend. Yes, UK mortgage rates have gone up and UK lenders have taken popular products off the table, but for the most part, people are still looking for prime and sub-prime mortgages and remortgages online.

However, it is early days and we are still bracing ourselves for a shift. Internet marketing strategies generally do have to be very flexible as even the slightest dip can fluctuate results. Although Google Adwords, Yahoo Search Marketing and Microsoft Ad Centre are all essentially search engines, they all operate on different levels and to different audiences, providing a plethora of results. If I had to pinpoint any slight changes this early on, Microsoft Ad Centre has given us slightly more traffic, which makes sense, as in my experience, research-related keywords perform better here rather than on Google Adwords and Yahoo Search Marketing. All in all though, the credit crunch has not had a significant effect upon our day to day online business.

Will Critchlow

Will Critchlow

Will founded Distilled with Duncan in 2005. Since then, he has consulted with some of the world’s largest organisations and most famous websites, spoken at most major industry events and regularly appeared in local and national press. Will is part...   read more

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1 Comment

  1. Interesting post - we'll see how it pans out over the coming months.
    Here's a guest post on my blog about PPC spending, and how to do it well....in times like these:

    http://equatorlive.com/blogs/mmmbop/equator-ppc-management-the-cream-of-the-crop/

    reply >

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